Bitcoin is a decentralized blockchain-based crypto asset that does have some common properties with gold. This is probably why many call Bitcoin “digital gold”. In January 2021, Bitcoin’s price has surpassed $8700; so, the question now is, whether it is safer to invest in the Bitcoin or gold.
Similar to gold, Bitcoin has a finite supply; there can only be 21 million Bitcoins and not anymore. Like gold, Bitcoin cannot be issued by banks or governments. It is generated by the computing power of many miners. Miners work individually or in pools to verify transactions. For every successfully-mined block the miners get rewarded in Bitcoins. To make sure that the crypto market does not get flooded with Bitcoins, the reward gets “halved” every 4 years.
Is Bitcoin “digital gold”?
- Trading, weighing, and tracking gold conforms to a proper established system. You cannot get away with counterfeit gold, or steal gold, or corrupt it. Bitcoin similarly cannot be corrupted because of its decentralized and encrypted nature. However, the infrastructure to ensure safety still remains elusive; for instance, the Mt.Gox incident in 2014 exposed how prone cryptocurrency exchanges can be to hackers.
- Both Bitcoin and gold are finite entities but one cannot say which will get exhausted first. Currently, bitcoin is traded using automated trading bots like Bitcoin Superstar to increase the speed of trade; check here to know Was ist Bitcoin Superstar?
- Gold has been used for making a wide range of products, starting from jewelry to applications used in electronics and dentistry. Bitcoin on its part has also been used for many applications; the blockchain is all set to revolutionize the banking system. With Bitcoins, it is possible to send money across borders faster and with minimal transaction fees.
- You can get cash easily in exchange for gold as compared to in exchange for Bitcoins. Bitcoin’s market is certainly more limited when compared to the market gold enjoys.
Myths and facts about Bitcoins:
- It is argued that Bitcoins have no intrinsic value because it is not backed by any government. So, if society were to face a crisis suddenly the Bitcoins will cease to have any value. At the same time, there are counter arguments that Bitcoin’s value is determined by demand-and-supply; so, if its usage grows, this currency will continue to be there and its value will also go up.
- One of the biggest myths about Bitcoins is that they are only used for illegal activities. While digital currencies have certainly been used by people for buying illicit drugs or weapons in the past, the truth is that these transactions on the Dark Web were illegal, not Bitcoins. It is possible for criminals to do the same using regular currencies.
- Another myth is that digital currencies like Bitcoins are anything but secure. This is because there have been many cases of thefts and scams in the past. But there are ways in which the crypto investor can protect his holdings from hacks and frauds. Besides, governments have started to show an interest in using the blockchain technology.
- It is argued that crypto coins are a scam. But investors must treat crypto assets just as they would treat fiat currencies. Every investment has its risks and you need to proceed with caution. You can be easily drawn into fraudulent investments even in the traditional financial system.
- The biggest myth of all is the fact that Bitcoins have been hacked previously, and that makes them vulnerable to hacking again. But, with proper security measures like two-factor authentication on exchanges and use of cold wallets, much of these risks can be minimized.